InvestorQ : How do you see the OPEC meet impacting the crude prices in the world?
Anu Biswas made post

How do you see the OPEC meet impacting the crude prices in the world?

Ria Jain answered.
1 year ago

The Organization of Petroleum Exporting Countries or OPEC along with its allies will meet on a virtual basis on 01-Dec to finalise a possible extension of production cuts. The primary aim of the OPEC and its allies is to keep the oil prices buoyant.

Members of OPEC firmly believe that if the production cuts that are on at present are withdrawn, it could lead to a collapse in oil prices like in April this year. In April it may be recollected that Russia and Saudi Arabia were at loggerheads resulting in excess supply.

Currently, OPEC has cut oil output by close to 7.7 million bpd, which is one of the biggest sustained cuts in recent times. In fact, the supply had largely managed to avoid the glut in the market till COVID created a mess out of the arrangement.

In the forthcoming meeting of the OPEC, the limit of 7.7 million bpd cut is likely to be toned down to just about 5.8 million bpd, which the OPEC members are confident would be sufficient to keep the oil bears at bay and keep the oil prices held at a remunerative level.

While an extension of cuts, albeit to a reduced extent, is the most likely scenario, there is always the possibility of discord among the 23 member countries of OPEC. Most of these countries do not have the financial clout of Saudi Arabia but would like keep normal production going to support the cause of the US.

The one good thing is the falling US output and Biden’s attempts to focus on stopping the fracking in Federal lands. If that turns out to be true then the one singular factor that could impact shale supply, India and China demand will pay a key role.